- You can charge 8% above the Bank of England base rate plus a fixed sum of £40, £70 or £100 on any overdue business invoice.
- The right is automatic. It does not need to be in your contract and the customer cannot simply refuse it.
- If no terms were agreed, payment is due 30 days after delivery or the invoice, whichever is later.
- Most late payment is caused by process rather than cash. Invoice immediately, address it correctly, and chase on a schedule.
Chasing money is the worst part of working for yourself. The law is more on your side than you think, and most late invoices are late for boring reasons you can fix.
Late payment is the most common cash flow problem in UK small business, and the most under-addressed. Suppliers tolerate it because they fear damaging the relationship, and customers learn quickly which suppliers tolerate it.
This guide covers the terms that reduce the problem, a chasing sequence that works, and the statutory rights sitting behind you. The late payment interest calculator works out exactly what you can claim on a specific invoice.
Most late payment is process, not malice
Before reaching for legal remedies, it is worth knowing that the majority of late invoices are late for boring reasons: the invoice went to the wrong person, it lacked a purchase order number, it arrived after the payment run cut-off, or it is sitting unapproved in someone's inbox.
Fixing those takes no confrontation at all and removes most of the problem.
- Invoice immediately. Every day between finishing the work and sending the invoice is a day added to payment, and the work is freshest in the customer's mind at the end.
- Send it to the right place. Ask at the start of a job who processes invoices and what they need on it. In larger organisations this is almost never your day-to-day contact.
- Include what their system requires. A missing purchase order number is the single most common cause of an invoice sitting untouched for a month.
- Know their payment run. Many companies pay on fixed dates. Missing the cut-off by one day can cost you a full month.
- Confirm receipt. A short email three days later asking whether the invoice arrived and is approved catches problems while there is still time.
Terms that actually get honoured
If you agree nothing, the statutory default applies: payment is due 30 days after the customer receives the goods or services, or receives the invoice, whichever is later. Agreed terms between businesses should not normally exceed 60 days unless both sides expressly agree and it is not grossly unfair to the supplier.
| Tactic | Why it works |
|---|---|
| Deposit up front | Filters out customers who were never going to pay, and covers your costs if a job stalls. 25% to 50% is normal for project work. |
| Stage payments | Limits your exposure on longer jobs and surfaces payment problems early, while you still have leverage. |
| Shorter terms | 14 days is perfectly normal for small suppliers. Thirty days is a convention, not a rule. |
| Terms in writing, before starting | Removes the argument about what was agreed, and makes a later chase a factual matter rather than a negotiation. |
| Make paying easy | Bank details on every invoice, a payment link if you can, and no requirement to log into anything. |
You have the statutory right whether or not it is in your contract. Stating it on your terms and on the invoice itself changes the customer's expectation before the invoice is late, which is much more effective than raising it afterwards.
A chasing sequence that works
The aim is to be consistently, unemotionally persistent. Escalate on a schedule rather than on how annoyed you feel.
Friendly reminder
A short note that the invoice falls due shortly, with the invoice attached again. This catches approval problems before the date passes and is entirely non-confrontational.
Prompt, factual note
Invoice number, amount, date due. Ask whether there is anything holding it up. Fast contact signals that you are tracking it closely.
Pick up the phone
Email is easy to ignore. A short call to accounts payable usually establishes the real reason within two minutes, and it is much harder to give a vague answer live.
Formal notice, copied to your contact
State that the invoice is overdue and that statutory interest and compensation are now accruing under the Late Payment of Commercial Debts (Interest) Act 1998. Give a specific date for payment.
Pause further work
If your terms allow it, stop. Continuing to deliver while unpaid increases your exposure and tells the customer the deadline was not real.
Letter before action
A formal letter setting out the debt, the interest and compensation claimed, and a final deadline before court proceedings. This is where most genuinely disputed and most genuinely stalling cases resolve.
What the law entitles you to
Under the Late Payment of Commercial Debts (Interest) Act 1998, on business-to-business debts you can claim all three of the following, automatically:
The fixed compensation is £40 for debts under £1,000, £70 for debts from £1,000 to £9,999.99, and £100 for debts of £10,000 or more. It is payable per invoice, not per chase.
On a £4,800 invoice paid 45 days late at a 4% base rate, that comes to about £71 of interest plus the £70 fixed sum, so £141 in total. The amount is rarely life-changing. Its value is that it converts a vague complaint into a specific, legally grounded number, which tends to move an invoice up the queue.
The Act covers business-to-business debts and debts owed by public authorities. It does not apply to consumers. For consumer debts you can only charge interest if your contract provides for it, and the rate must be fair and clearly disclosed before purchase.
When and how to escalate
If a debt is genuinely disputed, resolve the dispute. If it is not disputed and simply unpaid, the escalation path is short.
- Letter before action. Sets out the debt, the interest and compensation, and a final deadline, usually 14 days. Sending this properly is a requirement before court and it resolves a great many cases on its own.
- Money Claim Online. For undisputed debts, the small claims track handles up to £10,000 and does not require a solicitor. Fees are proportionate to the claim and recoverable if you win.
- A debt recovery agency. Typically takes a percentage. Worth it where the sum is large enough and you would rather not spend your own time on it.
- Write it off. Sometimes the right answer. Cap the time you spend chasing, decide the cut-off in advance, and take the bad debt relief on your VAT return if the debt is over six months old.
Reducing the risk before it starts
Protecting your cash flow
0 of 10Customers who pay late are usually paying someone else on time. Payment order is decided by which suppliers are organised, consistent and mildly inconvenient to ignore. Being polite and being persistent are not in conflict, and the suppliers who chase properly get paid first.
